Business | Aviation

Singapore Airlines in talks to sell Virgin stake

Delta’s European partner, Air France-KLM, could also buy part of Branson’s stake

AFP

Published: 15:29 December 3, 2012

Image Credit: REUTERS

A Virgin Atlantic aircraft comes in to land at Heathrow Airport, in London, in this file photo taken May 26, 2009.

Singapore: Singapore Airlines said on Monday it was in talks with “interested parties” on a possible sale of its 49 per cent stake in Virgin Atlantic as media reports listed US carrier Delta as a possible buyer.

“Singapore Airlines wishes to announce that it is in discussions with interested parties concerning the possible divestment of its 49 per cent shareholding in Virgin Atlantic Limited,” the carrier said in a statement.

“These discussions may or may not result in a transaction,” it added without naming any of the parties involved in the talks.

Virgin Atlantic was founded by British transport mogul Richard Branson in 1984, with the flamboyant entrepreneur owning a majority 51 per cent stake in the airline.

Britain’s Sunday Times newspaper identified Delta as one of the interested parties and reported that it had approached SIA directly over the stake, which SIA bought for £600 million ($962 million) in 1999.

If the sale goes through, Delta’s European partner, Air France-KLM, may also buy part of Branson’s 51 per cent stake which would see him losing control of the airline he founded for the first time, the report added.

Delta was not immediately available for comment.

Virgin Atlantic has over the years offered fewer benefits to SIA, said Timothy Ross, the head of Asia-Pacific transport research at Credit Suisse.

“Virgin contributes very little to Singapore Airlines, they have been unable to generate any real synergies and there’s essentially been no marriage of the brands, no leverage of network opportunities,” he told AFP.

“The contributions to (SIA’s) earnings or to cash flows... has been negligible,” he added.

Justin Harper, analyst with IG Markets Singapore, said any offer from Delta or any other rival carrier would have to be “compelling enough” for SIA to sell.

“Looking at the loss-making Virgin now it would be hard to see it (SIA) making much profit on that investment if it were to sell up now,” Harper said in a market commentary.

“So any offer from Delta or a rival carrier would need to be compelling enough for SIA to consider. The big attraction lies in the Heathrow landing slots that Virgin owns.”

SIA said last month its financial first-half net profit fell 30 per cent from last year, and warned the outlook was bleak as the eurozone debt crisis dents global business confidence.

The carrier has been strengthening its presence in Asia’s robust budget travel market as earnings from its premium service is hit by a weak global economy.

SIA’s long-haul budget subsidiary Scoot started operations in June, flying to several Asian destinations. Scoot in October said it would acquire 20 Boeing 787 Dreamliners with a total list price of more than $4.0 billion.

SIA also partly owns Singapore-based budget carrier Tiger Airways and has a regional wing called SilkAir.